Business

How I Saved $150 on My Monthly Wireless Bill

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Since the iPhone hit the market in 2007, consumers have been treated to a wave of smartphones that provide a huge amount of computing power wherever they go. But we're all paying a price for this. Literally.

The average family's monthly wireless bill was $149.07 in 2013, up 36% since 2010, according to J.D. Power & Associates. We get more for our money now; speeds have risen, as well. But as I examined my $200 AT&T bill each month, I often wondered when the equivalent of Moore's Law would set in for wireless pricing. I remember when laptops cost $2,000 or so. Now you can get a decent one for $400. Why didn't I see a similar upside for wireless service?

In a Forbes interview, personal-finance blogger Mr. Money Mustache mentioned Republic Wireless as an alternative, low-cost carrier. Initially, I was intrigued, but then I read some bad reviews of the $19-a-month offering, particularly from The Wall Street Journal's Walt Mossberg, who had some issues with Republic's service, though he concluded that it wasn't a bad deal for people on a budget.

At that time, Republic was offering the Motorola Defy X, a mediocre device that used a 2-year-old version of Android. Since that review, Republic got the Moto X phone, and claims to have improved its service. In November, when the Moto X became available, Republic let me try the phone and its service.

My verdict: The Moto X is just about as good as an iPhone. Republic's service wasn't quite as trustworthy as my former carrier, AT&T's, but it was good enough to convince me to drop AT&T. That said, there are some downfalls to using Republic that doesn't make it a fit for everyone. However, if you're interested in dramatically cutting your wireless bill, this is your best bet.

Service

My initial experience with Republic's Moto X wasn't great. After unboxing it at Mashable's New York office, I had issues connecting to our Wi-Fi to start up service. I had so much trouble that I went to a nearby Starbucks, and tried its Wi-Fi. For whatever the reason, I couldn't get the phone going until I got home. After connecting to my home Wi-Fi, the phone was up and running in five minutes.

I had been using an iPhone 4S up to that point, and was pleasantly surprised by the look and feel of the Moto X. It didn't take long for me to make the transition. My only misgiving was that I could no longer access my iTunes library. However, since I mostly listen to Spotify, this wasn't a big issue.

Republic's secret to cost savings is to rely on Wi-Fi as much as possible for data and voice calls. When you're out of Wi-Fi range, it switches back to Sprint's cellular network; this used to mean that if you started a call on Wi-Fi, it would drop off as soon as you were out of range, forcing you to start it up again. Republic fixed that glitch, though, and I placed calls without worrying what network I was using. At the end of a month, Republic told me I was using Wi-Fi for calls about 44% of the time.

Most of the time, this worked very well. However, I did have a few dropped calls, and one afternoon when I was in downtown Newark, N.J., I found it impossible to call my wife on her Republic-based Moto X. The Atlanta airport was another dead spot for voice calls, but those were the only times during a one-month period that I had trouble.

Another issue I had early on was texting photos. For about three days after I got my phone, my texts didn't make it to recipients, and I kept getting error messages. Eventually, I contacted Republic, which told me it was due to a system-wide glitch.

My worst customer experience, though, was when I tried to port my wife's old number onto her new phone. After pinging Republic's online help desk, I received an email directing me to an FAQ page, which informed that a quick link should appear on the "My Account" page. It didn't. When I emailed Republic's help desk, I was repeatedly referred back to that same FAQ, which was frustrating. At that point, it would have been nice to talk to a human, but, alas, that's not possible with Republic. Bandwidth runs a lean organization.

"For 90% of issues, it works out pretty well," said company representative Keith Nowak. In my case, it didn't. If I didn't have access to Republic's public-relations team, I'm not sure what I would have done at that point. One fail-safe method is to just mail your phone back, and start over again (Republic offers a 30-day money-back guarantee.)

As it turned out, the issue was my fault. I have two Gmail accounts, and used both to set up two different Republic accounts. I was trying to switch a phone number with one account that wasn't connected. Still, the experience was discouraging and a major drawback.

Automated customer service is the worst part of the Republic Wireless experience, but everything else was great. Once mine and my wife's Moto X phones were up and running, I enjoyed almost exactly the same service I had with AT&T for about $150 a month less.

Cost Savings

My monthly AT&T bill came to around $200. A sample bill from August shows that I spent $80 on FamilyTalk Nation 1400 with Rollover, $30 for Family Messaging Unlimited and another $30 for Data Unlimited (I was grandfathered in.) That came to $140. In addition, there were $8.95 for "government fees and taxes" and another $41.33 for my wife's iPhone. When you add on $3.39 in additional surcharges and fees, the grand total was $198.70.

At Republic, my bill for two Moto X accounts is $52.78. That's a savings of $145.92 per month. If I'm able to save that much every month, and invest it in an account earning the S&P historical rate of return of 11.67%, I'll have $12,301.98 in five years — that's enough to buy a new Nissan Versa.

Admittedly, that doesn't take the price of the phones into account. A Moto X costs $299 plus tax through Republic Wireless. With shipping, that comes to $329.93 per phone, or $659.86 in total.

Since I was planning to trade up to an iPhone 5S, anyway, subtract around $200 out of that. Then I traded in my old iPhone 4S on Amazon (I was planning to give that model to my wife when I got my 5S), so take out another $180. That's $279.86 in total. If you amortize that over three years — the amount of time we intend to keep our phones — then I'm saving $138.18 per month. If that holds, then I'm still saving $6,215.77 over those three years— enough for three 15-inch MacBook Pros at today's prices, assuming that same rate of return.

At first, I didn't calculate saving that much because I was going to opt for Republic's 4G plan, which is $40 a month. (Republic also has a calls-only plan for $5 a month and an unlimited calls and text plan for $10.) Since I can't get 4G reception in my home state of New Jersey, however, I stuck with 3G. I don't play any games on my phone except for Scrabble, so I haven't found 3G to be a problem. I can still make calls, read emails and listen to Spotify all I want. And I'm thrilled to be saving so much money every month.

Longevity

Of course, this whole scenario could go belly-up if Republic goes out of business. Bandwidth.com is a private business, and the company hasn't released much financial information about Republic, so it's hard to say how well it's doing. However, if Bandwidth CEO David Morken decides to pull the plug on this venture, then I'm out about $300 and have two useless phones (Republic's Moto X phones are designed to only work on its network.) On the other hand, Republic could also potentially disrupt the wireless industry in a major way, ushering in wider use of VOIP, and dismantling the telecom oligarchy of AT&T, Verizon, Sprint and T-Mobile.

Roger Entner, an analyst with Recon Analytics, thinks that's unlikely, and believes Republic will likely remain a sideshow, appealing only to penny-pinchers.

"They haven't made a huge impact yet," he said. "I think they would have a better chance if they were better known." That would require millions — probably hundreds of millions — of dollars in ad spending, which Republic would naturally have to subsidize by raising its prices.

I spoke with Morken recently and asked how Republic was doing since it began offering the Moto X. (Disclosure: Morken is good friends with my brother-in-law and wife; all three went to the same high school. I wasn't aware of this when I first began writing about Republic.) Morken didn't disclose any details about Republic's finances or subscriber figures, but said Bandwidth will make around $150 million this year, and is on pace to make $200 million in 2014.

Republic isn't yet profitable, but is on a net new subscriber basis, which means it makes money on every new subscriber, but only if you don't factor in startup costs. It will probably take years before Republic is profitable overall, Morken said. Meanwhile, don't expect a flurry of advertising from the company any time soon. "We have a view that we should be investing in product and word of mouth is what we rely on," Morken said.

That's not usually the way you build telecom brands, but Morken believes that the Internet and social media have changed that. He points to Xiaomi, a Chinese smartphone manufacturer that sells directly over the Internet, as proof that the distribution system works. He also believes that the value proposition behind Republic will get around. "I think just because there hasn't been a virality story doesn't mean there won't be one," he said.

If Morken's right, it may eventually cause Sprint to regret its decision to enable Republic. Will the company turn out to be a Google to Sprint's Yahoo?

Perhaps that's too grandiose a comparison, but like Google in 1999, Republic is on the right side of a market with huge potential. I believe there are a lot of consumers like me, who are tired of making the equivalent of a car payment every month to use a wireless phone. For us, Republic is the best deal to come along in years.

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